welcome to "squawk box." i'm melissa lee with joe kernen and wilfred frost sitting in with us for the next two hours is mike santoli. let's look at yesterday's record breaking rebound the dow logging its largest one-day point gain in history. the 4.98% gain was the biggest upside percent move since march of 2009. it was the biggest post-christmas rally for stocks ever retail led the way shares of wayfair, kohl's, dollar general jumping more than 7% amazon stock up 9.45%, wiping out declining from the christmas eve selloff. the stock pairing some of those gains this morning >> checking on the markets right

now, pointing lower after that positive move yesterday. we are about 350 points lower. around 1.5% for each of those major indices. yesterday we gained 5% for the dow and the s&p. in asia, positivity in japan after a very poor christmas day performance. up 4% today. hong kong and shanghai both lower. european trade less positive than that. the dax down 1.5%. france flat. the rest of europe showing declines european trade has been closed the last two sessions. so this the first trade since the christmas eve decline there. treasury yelleds this morning, around 2.75% on the ten-year sitting just above that level today, 2.77% >> all right let's talk about what we saw yesterday. it's not just yesterday because, i mean, monday was just

horrific closed the next day, 600 points. isn't the santa claus rally the week after christmas >> this year it's the day before -- it sets you back >> the last five days. santa claus was dedelayed, thene came, 1,000 after you lost 600 following a series of 500-point losses >> yesterday's rally took you back to thursday's close it made up two days of losses. and today's futures decline brings you back to 3:30 p.m. yesterday. so that's the last half hour that rush higher >> prior to that thursday you're talking about, every day we lost 500 points >> i think yesterday all it did was interrupted this process and this mindset that -- >> don't say that. we don't know. >> interrupted it not ended it. >> was bigger than we expected >> it was. it was just a measure of how

overextended things were to the downside >> it's positioning. a lot of it was short covering looking at the biggest gains in yesterday's session it was the most highly shorted stocks in the market >> still felt a little better. >> it's these air pockets because it's the last week of the trading session. >> almost 600 and change in market cap >> 600 billiomillion. >> if you include the decline on christmas eve, defensive sold off most utilities is the worst sector this week. it's not like we've been led lower by momentum stocks >> monday seemed like almost -- it was an unusual day. it was an emotional thing. it was headline driven it was the half session. it didn't seem like real money retreating friday was intense

expiration lots of volume you had to -- >> it wasn't thin trading on monday >> was busy enough >> for a 1:00 close. all right. oil matters, doesn't it? >> oil goes along for the ride >> seems like oil needs to stabilize or -- >> there's a sweet spot for oil. you don't want it to be too low. >> under 40 probably qualifies as too low >> yeah. agreed.joining us more to talk t this is jodie gunsburg and brett ryan from deutsche bank. big jay powell fan >> we are. >> i have seen people say price discovery is finally back. you can pick your poison who you want to blame for this you can go and say powell is dealing with what he has to do given the hand he was dealt by bernanke an

yellen and even greenspan. so you think the latest rate hike was appropriate but what about next year >> yes, absolutely he did the right thing because of the labor market. four of your five monetary policy rules that the fed follows all say to hike. he to hike he wouldn't be doing his job if he didn't. with the unemployment 70 points below neru, this is what monetary targets tell you to do. if the economy performs as he's expecting, 2.3% growth, yeah, it does warrant further hikes >> we had a long discussion with steve liesman yesterday about

the autopilot comment when it comes to the balance sheet would you have liked to see him be more flexible on that point >> i think there's a misperception that the fed balance sheet is affecting the equity market. the balance sheet is a tool to implement monetary policy. reserves peaked at 2.8 trillion in 2014. they have come down almost a trillion since then. yet the equity market rally between august 2014 and september is about 40% if the ten-year rate was at 3.75 right now, and the fed was actually selling, because they're not selling, they're letting it roll off, if you had treasuries competing with risk assets, then i would say you have an argument there >> people say liquidity claims are indicating problems, and that it seeps over into stocks there's huge demand for dollars worldwide.

>> libor has not gone up that much at all. banks are very well funded >> you did see the s&p go down 20%, right >> yeah. >> i know we can't blame everything on the fed. everything is great. these guys are doing what they're supposed to do go jay go six times next year you're a bond guy, aren't you? what about all these people with 401(k)s, brett >> the stock market will stabilize. >> this is our medicine. take your medicine >> the communications got a little mixed up with the -- >> is that what it was it's not the actual deeds themselves >> no, they had trouble communicating what their pace was going forward. >> if he said it differently, we wouldn't be down -- >> jodie, did we close in bear market territory >> we did not. what did we get to >> we got to my ninus 19.8%

>> can't we round up can i say we hit -- don't you think with individual stocks, we hit bear market territory? >> it feels a lot like bear market territory what we saw every single size sector, style of the market is down for december. this is only happening nine times ever in history. and sometimes it comes in pairs. three of those times we've seen back-to-back months that are negative like this it's hard to ignore the fed, they raise rates, there might be a tighter credit market for the businesses we have seen global economic slowdowns particularly from china and from europe. we've seen the slow housing market this is broad based pressure that is on the market.

just because there was one positive holiday shopping number, doesn't mean everything is positive. >> i'm curious, people have a lot of losses, they may not want to take them in 2018 at a time when the market ispy and the markets seemed to want to go down >> i'm hopeful about january oftentimes when we see a december like this, this would be the 21st worst ranked december in 90 years we see positive januarys 13 out of 20 times we've seen positive years on average, 4.2%, following a december like this there's hope i think some things need to get resolved because we also have some things on the bright side there's the still growing economy. we've got the -- we've got t the -- in the growing economy,

we got the unemployment, the wages are strong the consumer spending is still strong we still have the consumer debt levels that are okay there's a lot that's just okay and that's fine in the economy it's just that there's these other issues, too. it can go either way >> brett, you think inflation is on the horizon or does that matter? we have a 60% plus participation rate the nominal rate is low, three point whatever it is but there's all these guys of working age that are not in -- to take up the slack you still have disinflationary forces around the globe. if you didn't have inflation bubbling, if you knew for a fact for the next two, three years it would not wage -- push that type of inflation, why raise rates?

>> sure. >> why is it necessary to do that you don't like prosperity? you're afraid of the good times? >> negative rates and japan seem to be doing so well over there we tried that policy as well it's not about seeing a takeoff in inflation any time soon you're right, to the extent that inflation is not pushing them to hike rates, you have to balance the labor market overheating you're seeing the rising wages >> which is good >> which is great. you know it's building and in that sense you can take your time for sure that's what i think the key is, the fed is trying to tell you we will slow the pace here. we're now in a different mode than where we were last year where it was a lockstep march that we were willing to ignore a few weak data points last year, because we're sure we're below

neutral. now as you get to the neutral range, it becomes more of a difficult decision >> the other way to look at it, you're producing 2% core inflation with the fed funds rate at 2 or 2.25. you were producing about the same at zero you're producing the same amount of inflation with rates higher so therefore something is happening in the economy to tighten it up. >> yeah. to judy's points, look at consumer spending. in the fourth quarter we're looking at 3.6% anannualized that's above my forecast everybody expects growth to slow expects the isms to move lower next year, still your monetary policy rules would tell you to keep going >> if you argue that -- if you're arguing that the new absolute level of interest rates needs to be adjusted because of the amount of debt that we built up over ten years with all the free money --

>> yeah, because even going up to the extent we've gone up so far, our costs have skyrocketed in terms of servicing that debt, you're just making a -- it's different this time argument are you sure we're not at neutral already? >> it's fair to say we're in the neutral range. >> should have been one and done then >> i keep saying this. the consensus of the two rate hikes next year tsh, it may be o >> it's the back half of the year, anything can happen by then >> great >> one problem is they were near-term hawkish, long-term dovish what they did was, they thought they were being dovish by taking down the douts s dots in 2020,n that gave a free license to buy the back end that flattened the curve more. that exacerbated the equity

selloff the past week or so. the flattening of the curve, which is partially done through their communications that's where i say they had a bit of a communications issue. williams was sent out. he sort of clarified things. i think we'll stabilize from her here >> it's fair to say the fed and peoples expectations around it has been a key factor. dollar yesterday was up, equities up. dollar down, equities down it's not like people are thinking we'll get more or less hikes. >> it hasn't been swinging around that factor necessarily when the market is under this much stress for this extended period of time, the market is just trying to fight its way out of this hole as opposed to reacting to every bit of macro data. by the way, we have a meeting in january. it's coming fast >> and a press conference in

january. >> eight live meetings next year you have six chances for them to do nothing before they get to their last two meetings. >> how many times will he say autopilot next time around >> perhaps zero. >> i think zero. >> there's a sin word for thactt percentage of analysts who are bullish? >> you were 20% higher three months ago the market has gone away from the target so far -- >> some have revised lower their 2019 -- >> it must average 3,000 >> i think the targets look as if the street is more bullish than it is, than it believes it is >> there is also the point to make, the msci world index is down 12%, 12.5% year to date so there's a lot of people who are not just looking at declines in the last couple of -- >> you are a globalist

>> i'm saying, this is why -- >> i don't care about the global i care about america we have our own things here. >> was a legitimate point relating to the u.s. >> did anybody in this country or city say when the ecb said, you know what? we'll end qe, my gosh, but the euro stoxx 600 is down 15% from its high they're not looking at that. it's not the same equation here we think the fed will rescue the market. >> that's the other thing that is an important point. the fed is less attuned to short-term equity market moves and more attuned to what's going on in corporate credit spreads that's where they start to get more concerned for example, developed market ig spreads, about 140 over treasuries at the moment the last time the fed relented in 2016 when they cut the dots

and deviated from their path, those were blown out to about 210. >> all right >> so we're still a bit away from that zone where they get concerned enough to step back. that's where the imbalance is. >> it would help to get a central fiscal authority before you share a common currency. don't have us stuck in your economy -- what are your german bonds now? >> my german bonds >> don't bring that over here. >> you're still part of the eu you have not brexited. >> it's a jury riggreason why we problems >> i'm the architect >> god help us if that's our economic model >> by the way, the slowing global growth outlook is a massive factor what are your bonds in germany

>> what are your bonds >> my bonds -- >> he's my euro proxy. >> that's red zone >> is it >> totally red zone. why? >> you can't paint one person -- >> the dax is down 18% >> what are your ten-years how are we supposed to be raising rates -- >> correct one factor for why we have such a flat yield >> you're the one criticizing me for mentioning anything outside of the u.s >> now you're learning how to run an economy here. i figured it would be running off on you. president trump returning from a surprise trip from iraq to a capital still in shutdown mode ylan mui has more. >> president trump is huchkerrihuchk er nkering down for a potentially lengthy government shutdown. the president arrived back to washington after making that surprise trip to iraq to visit the troops while on the ground there he doubled down on his demand for border wall money in exchange

for government funding >> how long do you think the shutdown will last, mr. president? >> whatever it takes we'll have a wall. we'll have safety. >> the president defended the timing of his trip it was the first time for him visiting troops in a combat zone something he was criticized for not doing earlier, but it did come on day five of the government shutdown. the president previously wanted $5 billion for a border wall, but one source said the administration has agreed to come down to 2$2.5 billion, others say that number is not set in stone the senate comes back in session today. the house will not hold votes. so the shutdown will last until at least tomorrow. the most likely scenario right now is for the house to pass a short-term spending bill on january 3rd once democrats take control of that chamber. that bill would likely fund the

government through february 8th, but it's up to the senate to pass it and the president would have to sign it. still to come, the s&p 500 surged nearly 5% yesterday wiping out the losses from the christmas eve selloff, but china sat out the rally overnight. there are a couple reasons why we'll explain that next. and as we head to break, a look at biggest premarket winners and losers in the dow. introducing add on advantage,

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morning selloff. amd and nvidia down by more than 2% here. shares in japan surged overnight but china sat out the rally. a couple of stories weighing on china stocks earnings, china's industrial firms in november dropped for the first time in three years. there was slowing sales growth and rising costs analysts anticipating further weakness in 20189. and china's state-owned oil company, sinopec, reportedly suspended two officials at its trading arm. the stock fell more than 4.5% overnight. the company suspended its president alonged with the senior communist party representative government inspectors reportedly

found severe trading losses in the second half of the year because of wrong market judgment a little of that happening here. the reports say no wrongdoing is suspected. >> the bigger point from there was two days ago, or a day and a half ago, making clear they're willing to ease again. it's more of the same. >> another big factor for the markets right now, the u.s. china trade fight. we're learning the u.s. trade delegation will travel to beijing the week of january 7th to hold talks with chinese officials. the group will be led by representative jeffrey garrish and include david malpas. and reuters reporting that the white house is considering a new executive order to bar u.s. companies from using equipment from zte and huawei this would be the latest move by the trump

administration to keep the chinese companies out of the market the white house argues that huawei and zte work at the order of the chinese government and their equipment could be used to spy on americans coming up, we're crunching the numbers from the holiday shopping season. we're talk about the big winners and a new way shoppers are paying for purchases checking u.s. equity futures, they're down 300 right now, s&p down 35 nasdaq down almost 100 as we head to break, a look at yesterday's s&p 500 winners and losers for your heart...

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♪ welcome back, you're watching "squawk box" live from the nasdaq market site in times square good morning if you are just waking up, let's look at u.s. equity futures. we're looking to open lower by 314 points the nasdaq down about 100 points the nasdaq giving up 35. we see some pressure on european numbers. the dax down and the cac is the only one eking out any gains yesterday crude oil rallied 8% percent. we're seeing a decline in wti

and brent. before the break we showed you the one s&p 500 stock that did not post gains in yesterday's session that is n newmont mining, down by 5 cents. blame gold the price of gold this morning is -- >> that meant more than 500 stocks in the s&p were up. >> it was like 99.8% >> all dow stocks comfortably. >> in the green. jp morgan will pay $135 million to settle charges by the s.e.c. regulators say the firm improperly handled thousands of transactions involving the shares of foreign companies as part of a broader probe for misconduct in adrs the fine against jpmorgan is the eighth action taken by the s.e.c. as part of that probe back over to you

the federal trade commission is warning netflix customers about a new e-mail scam. criminals are posing as netflix and they're asking people to confirm payment details. experts say it's a good idea to avoid clicking on links like this in e-mails. it's best to log into your netflix account from the netflix website. hollywood got a long-awaited gift the yearly domestic box office take was the biggest ever and there's still four days to go. the previous record was set in 2016 it was all about superhero movies, "black panther," "deadpool 2" and "jurassic park." here's what i read, $11 billion with the amount of cultural significance that hollywood has, it's an amazingly small number it always is to me every year. there's a lot of ancillary stuff, i understand that for the amount of heft in

everything that happens -- >> that's a u.s. number, correct? think about the box office in china. >> think about a wal-mart daily sales. >> yeah. >> it's amazing it's 11 billion. i wondered about our society "black panther" and disney super heroes we're all watching a bunch of super heroes movies? where's "sense and sensibility?" >> i went to see "vice." >> how was that? >> that was good >> what movie? >> "vice." >> you didn't capture joe's eye roll >> you don't like politics >> did you see any of -- >> what else is going to -- i will watch finally "first man" my family saw it

>> i thought you were against that one >> i don't think it would have killed them to put a five-second shot of the flag on the moon >> maybe in six months you will see "vice ""a." >> and if the uk landed on the moon -- >> am i german or -- >> you're everything you're not german, you're over there in the -- >> in that zone. >> doing the right thing getting out of that mess >> wilfred is a name of german heritage >> the queen is part german. >> she is. >> don't help him. don't help joe move on. >> as i said, you're doing the right thing trying to extricate yourself from that mess. at least you never took the currency an update -- you're not a ram

ramoner, are you >> i don't reveal my politics on any issue. unlike some people >> i'm just liking free markets. >> prosperity. >> prosperity. like larry kudlow. >> so you voted democrat as many times -- >> i voted for jimmy carter. >> carlos ghosn was rearrested on friday. investigators accused him of passing personal losses on to the japanese automaker do you vote here yet >> you have to be a citizen. that's a long way off. you have to be here -- a green card is five years citizenship is about -- i don't know ten years or something, isn't it not sure >> we're watching closely. >> as soon as you become citizen, you are taxed for life

on the u.s. side >> a lot of people love taxes. >> globally. >> the price you pay to be american >> a small price >> any way -- any way -- >> the retail sector is on pace for its best holiday season in six years. will the moment tum continuedumo 2019 jason joins us now the contactless payment is still very low in the u.s. versus europe >> versus the uk where its popular. it's a single digit percentage of transactions here in the u.s. we're familiar with contactless, using our phones to pay. you can do that at more than 70% of retail locations today. but u.s. consumers are not acust temperatu used to using the cards to tap to pay >> this holiday season, is the

data showing it's growing in the u.s. fast orare people reluctant to change? >> now that we changed the infrastructure at the u.s. point of sale to chip reid eraders, te is that capability samsung pay, google pay and apple pay is driving some of that, but in 2019, card companies will be issuing these contactless cards. >> the payments are still going through credit cards, even if you are doing it on samsung pay, apple pay. so it's not as big a threat as we thought it could be to the traditional payment companies. >> that's right. it's an enhancement to the existing service providers it's a real threat to cash contactless payments because they're quick and easy for consumers to use we expect in 2019 for that to

replace 2$200 billion worth of small ticket cash items, where you go into your coffee shop or quick service restaurant, traditionally for low dollar items you would use cash, which is hard for restaurants because they want to move the lines fast it's a displacement for contact. >> when we say contactless, it has a small penetration compared to other parts of the world, does every retailer equipped with equipment to accept contactless payments, if they're not how much more of an upgrade needs to exist and who makes that device? >> about 70% of retailers in the u.s. has the contactless enabled today. 70 out of the top retail verse it cvs, walgreens, most quick service restaurants have it. some large retail verse not implemented it yet they actually have the system installed. if you upgraded to a ch

chip reader, it's in there the question is is the retailer turning it on or not whon >> who makes that? >> two large ones are verafone and others >> here it doesn't work as smoothly i find. >> we have done software upgrades >> the company compaies are manufacturing it >> they are. >> interesting there we go great stuff. jason oxman, thank you >> you are going to make a snide movement >> no he's pushing me. don't push me. >> contactless pay, the u.s. is way behind >> i believe it. rich, creamy sauces, wine. there's a lot of great things about europe there are. beautiful scenery. old things i love it.

>> old things. >> a lot of great old things >> i love it i love it there. i do >> coming up, the market's wild ride, we'll show you the stocks getting hit the hardest in the premarket selloff. and sports gambling is lega in some states we'll tell youowuc h mh revenue the sports books have generated so far

welcome back to "squawk box. dow could lose 328 at the hope s&p 500 looking to be down by 37 nasdaq looking to lose 100 we're keeping an eye on semiconductors which are seeing weakness in the premarket trade, down about 2% across the board, micron, adm and enindividualya >> people think that's an important group. 2018 saw a big turn in the sports gambling industry eric chemi has more. and then you'll give me your picks? >> of course 2018 was a banner year for sports gambling. the supreme court struck down a 1992 federal law

now every state has the ability to legalize sports gambling within its borders eight states have legal wagering, expect more to come in 2019 with more than 20 states working towards legalization revenues are still small like the box office numbers you mentioned earlier, joe in new jersey, that's the second biggest state behind nevada t the industry has had $73 millio in revenues for the sports books and $8 million in taxes for the state. we checked in with friends at the action network to check out which teams were the most popular bets the most popular picks were the obvious ones alabama football, patriots, the boston red sox, and the golden state warriors a lot of squares out there betting. the most profitable nfl team against the spread has been the 13-2 new orleans saints. they are on a 51% roi. the least profitable team, the falcons. you would be down 55%. next year expected the business

trends to continue more states will legalize. there will be more partnerships between the leagues and the sports books and gambling will add to the tax revenues of these cash-strapped states looking for any money they can get >> all right thank you for that >> that's the executive edge part of it >> i got it. that's the joe edge. >> we wanted actionable ideas here that people can use -- >> nfl, college football >> college football. >> the cheese-it bowl? >> is clemson 13 points better than notre dame? >> alabama and clemson make it to the finals every year if you think all of a sudden notre dame playing an independent schedule that had some touchy wins there is that much better than clemson -- melissa is going -- >> it's going to be alabama/clemson. >> we saw warriors and cavs four years in a row >> maybe we do maybe we don't clemson deserves to get 14 poin points i'm sorry, oklahoma/alabama.

>> ten points i go with the favorites 14, you're on the line that's where they get you. if it's 13 1/2 versus 14 1/2, those halves make a difference >> patriots have lost a lot of games, more than normal. >> what happens with these obvious teams, the public -- national audiences will bet on these teams. if you're the tennessee titans, you don't get a lot of national love the packers, cowboys, patriots fans across the country move their spreads wider than they should be. >> this is american football just go slow it's the oblong -- you know, not -- >> points, not goals >> thank you >> they're scoring >> incredibly confused >> there's no zero zero games. >> can you imagine anyone watching a sport where there's a low score? >> no. >> what's interesting is talking to experts who run books in the u.s. and europe, they say this is not like silicon valley

we expect the best companies in the world to be american companies. we expect the facebooks and googles to buy european assets next year there will be a trend where european technology companies will buy american assets that's the one industry where they're more advanced in europe than here. contactless payments and sports gambling >> tying it together >> those are the two things better in europe than here >> i was trying to think if there's one on the top of my head i can point to. i'm not sure there is. >> who is 234 the super bowis i your view? >> this is the year of the saints all in a dome. >> it's loud >> pasta and wine. two more >> coming up, some stocks on the move >> bangers and mash. >> we're back in a couple minutes.

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talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife. january 2019, the jpm health care complex the consumer electronics show. the detroit auto show. the world economic forum at davos. plus, the fed decision earnings and how to take on the markets all january long on cnbc with the resignation of general mattis, secretary of defense, the outlook for defense stocks in 2019 just got a throughout cloudier. joining us is the research

founding partner in defense, carter, great to see you what is uncertain now with his resignation? >> well, look, melissa, i think the entire defense group has gone through a big year. i mean, this was a pretty teflon group of stocks for the better part of five years they went up at first because they were value stocks then they had growth and commodities fell apart it's a very unique group that people flock to as a part for safety but we look at that train came to an end, and people know that the defense budget doesn't necessarily go up forever. it requires a lot of stewardship, to get higher budgets through congress, especially through an era of gridlock so, the group got awfully expensive. i think there's a lot more questions about whether or not budgets will grow as much as

anticipated. and quite frankly, companies have done a lot to improve themselves in their returns over the last several years i think the street is kind of warming up to that and coming up to the belief that maybe this is out of gas >> right >> i think now, given the weakness in december, i think the real question is, okay, well, is there real value here or when you look at this group on a relative basis, can i now find deals in a relative basis which people see in defense, which to date has been safety. >> right now, we're showing a chart that tracks the sector as the sector, it's down about 10% in the past year we see some of the picks that you have, general dynamics and these are ones that have gotten wat battered what have these companies down to make themselves look better and make themselves look like values right now >> yeah, i think the real thing

about using an ita is aerospace and boeing, the biggest constituent of that, boeing, a fantastic stock which we're recommending highly has dominated. the defense group down 25 points on the industrial etf which is where a lot of people are going to benchmark these stocks. depending on the name, some are down in the high teens, some are down in the mid-20s. the ones we like in defense are the ones that we think the earnings algorithm is high quality. we've been pointing out in the last 18 months or so, we think the defense earnings for many companies are overstated due to one primarily being pension income when we look through earnings, we want to find defense stocks which we think the true earnings of a company is truer to the one being reported

if they've all sold off in roughly equal proportions and they trade at similar valuations, then we want to find the one that has the hire earnings default. >> right those two plus harris, you like. you also mentioned boeing. boeing has done well, as well as the s&p 500. do you highly recommend it because of exposure to commercial it's a little more diversified stock than from the energywide >> yeah. i think when you compare commercial and defense, what you find in defense is a group that historically, you know, over the last 40 or 50 years have not outgrown gdp when you look at aerospace, the opposite is true that is a gdp-plus group we're seeing the air travel because you're seeing the globalization of air traffic in demand so, when you look at boeing, you've got a fundamental market that's growing significantly faster than gdp on a sustainable basis.

whereas, in defense, you have a couple years outgrowth on strong budgets over the last cub of years. but to your earlier point, we see a change in leadership, we see a change in washington it's tough to know whether or not that will continue when you compare the two, the relative differences are high. when it turns out when you clear the numbers boeing's actually cheaper than what you see for defense. >> carter, thanks, carter copeland, research analyst and defense analyst. coming off the dow's biggest point gain in history, futures are indicated down about 350 points we're going to talk about the volatility with our guest host from jorn pmgabank that's coming up right after the break. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge

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breaking news, u.s. equity futures pointing to triple digit losses at the open that's the morning after the dow posted its biggest single day point gain ever. the call on crude, what this could be telling us about the broader markets and the economy. and the fed, the shutdown and the end of year portfolio balancing and all of the other factors. that's in the second hour as "squawk box" begins right now. >> announcer: live from the beating heart of business, new york this is "squawk box. good morning, and welcome back to "squawk box" here on cnbc live from the nasdaq market site

in times square, i'm joe kernin along with melissa lee our guest host, monica dicenso from jpmorgan private equity bank. getting back, down about a third. 328 on the dow, s&p indicated 35 or so. the nasdaq down 90 but under 100 points seems to be the mandatory trade up or down recently in the nasdaq as far as yields go, pretty amazing to see where the ten-year is -- oh, that's the market it's supposed to be a mix there, with japan rebounding but there's the ten-year at 2.77 pretty amazing >> touching on those international markets, asia mixed this morning, as joe just did, japan the biggest mover by far up about 4%. hong kong and japan down european trade and germany, the

biggest fall, down 1.7%. but significant declines across most of the markets, france holding flat oil prices rebounded significantly yesterday. up 8.7%. slipping 1.6% today. still down around 10% in the month of december. the dollar which gained for you yesterday was slipping a little bit today, particularly against the yen and the euro the pound closed flat. and gold prices for you which have been relatively strong in the last couple months as equity markets have sold off but not resoundingly strong, flat. >> the speculation about the fed has been a recent discussion here's what scott minard said on cnbc yesterday afternoon >> i would say it's 50/50 right now that we get a pause in march. and if that pause, depending on what happens with the markets and the economy, because we are starting to see weakness in the

manufacturing sector we got the richmond pmi which was down dramatically. i think there's an uncertainty, that the fed is likely to pause just like when oil collapsed in 2015 i really believe they've overdone it. i think the pace is about double what it should be. and i think at some point, the fed may actually realize that it would be in everybody's best interest if they went back and took a hard look at the balance sheet policy and slowed this thing down. >> what is mine erd dominerd doi money? >> i'd be a sebuyer rather than seller at this point so, we're close enough to a bottom >> the headline that we were running the entire time, 50% chance of a rate cut most of the time, analysts say

it's 50/50 i probably could have come up with that, 50/50 but 50% chance of a rate cut >> yeah, 50% when the market is really not there >> at all. >> yeah. >> i don't know what that would indicate though. i don't know if we want to be in a world when we need a rate cut. >> that world was here in 1985 when the fed turned around and fettered the break, as they say. and had a couple of weak quarters >> but to do it this time, i think would be indicating -- >> right, we probably have a few steps along the line before they get to that point of cutting >> joining us now, ahead of global research and chief investment strategist at bull tick markets monica dicenso, jpmorgan private bank let's start here with what really should be -- how we should be positioning things you're at 2950 for this year that's not looking too good on

the s&p anymore. how for 2019, 2900 is what we're looking for, right >> yeah. i think this is presenting great opportunities in the market both in the s&p and the merging markets. valuations are very attractive at this point in both the u.s. and i think if we get the anticipation on fed hikes as well as trade tensions with china. which i was on with you guys before the g20, there's some good chance that we get an indication of trade escalation i think we're getting that >> so if by the end of 2019, we're 50 points lower than what we thought we'd be at 2018, those are two disappointing years, aren't they >> the market is looking at what is a fear, not a reality 2.8%, my call for next year,

it's still above potential growth potential growth in the u.s. is 2.2% and i think the market is really exaggerated with regard to the market collapse precipitating recession. one thing does not necessarily mean the next. i think recession is too much discounted isn't the marketplace. and at this point, we're not going to get it this year. >> at this point, you'd buy the s&p? >> i'd be buying the s&p, or buying certain sectors, maybe financials, sectors, energy names, as well as the financial markets. i think those have been severely battered, joe, over the past year >> if you buy, monica, would you have wished you would have waited a month to buy cheaper, or do you buy here >> i think it's really hard. to katherine's point, all of these are on sentiment and very nervous with what's going to chap wigo g going to happen with china and the shutdown >> is the shutdown a big point

>> we have uncertainty picking up, while liquidity is going down and that's the perfect storm for what we're seeing right now. but unsettling people. i think that impacts sentiment the fundamentals, i agree with katherine, remain strong >> you don't price on the s&p or do you -- >> yeah, i think the challenges we're facing again, we were looking for a flat plus or minus 5% next year but after the pullback, if you believe the valuations stay where they are, or maybe increase a little bit, there's a good case for up. >> should valuations be where they are right now in terms of earnings growth for next year, have we seen the earnings >> earnings will be declining, but we do see growth, moderate, especially that we don't have the tax cuts >> katherine, you mentioned the big rate hikes are one of the

surprises for the year how many would be there as your target suggests? >> certainly, the dollar movement over 2018 indicated that the market is pricing in more hikes in 2019 which are unlikely to manifest i think we're max going to get one hike next year i doubt we get a cut if we were to get it, it would be a negative indication of a hour aggressive deceleration in terms of economic growth than i would have foreseen. so, i think we get one and the market is completely discounting that so, if in january, we get a de-escalation of trade tensions, if we do get earnings reports from the fourth quarter coming in pretty good, and i do think as far as our line for trump and xi to come out with some resolution, with regard to trade tensions, then we do get market upsides. as monica said, i agree with it,

sentiment-serving. what we need some some impetus, some spark to move it off bearish good news/bad news >> monica, with liquidity declining and with the turn of the year, is that going to change because i'm looking at the tactical stuff, yesterday, it checked off a lot of options, 90% actually overwhelming. the market kind of made a stand at that negative 20% mark, whatever on the other hand, biggest rallies happen in bear markets can you really trust a move in the last week of the year? >> yeah, the challenge is, i think look cheap but cheap things will stay cheap so until we get some resolution, something on trade, more than just a tweet or comment, we need more movement forward and the couple of granular ideas that we stand behind, i think we can withstand this change. if earnings come in okay, not a great number, just okay, and no big declines for '19, that

should be the catalyst >> i think there's no big reason to buy then. if we're waiting for the catalyst and if you're inclined to buy, you do part in the stock that you want to do. >> for the catalysts coming out there's a lot of volatility, using that outright or derivatives. >> katherine, you said financials, and what's the catalyst there >> i would say the sector, and one of the catalysts, of course, is the correlation that financials have with ten-year treasu treasury i see it going above 3 easily next year. with inflation picking up, economic growth, a fed hike at least one, i think probably maximum is one, honestly and i think it's to do well, lower regulation, cyclical and economic growth stays strong and steady and valuations are, again, very attractive but i think that's where you want to be positioned and industrials. if we do get what we're expecting in january or early

next year, from the escalation of trade tensions with china, then we do get an up tick in financials which have been battered >> does the ten-year go back to 3.75, or does the scare with higher mortgage rates is that over is that a positive that suddenly -- >> yeah, we get home data out today, right >> but we're down 2.77. >> because of the shutdown >> right >> if you start basing mortgage rates back on the ten-year again, that's been an immune rate to some extent. what caused the change in volatility that we saw that -- i mean, it's feast or famine >> right >> we went from zero volatility to just a lot of -- is that all fed? >> i think people look at it and they say this is crazy, this fie feels very unsettling, but happened in the last couple years, it was very different

>> and even though it's at the margin and then suddenly it's a different world? or it in the face of a slowing global economy is there something underlying that >> that's really the fear, right. >> oil, copper >> you look at oil prices, maybe not back to 70 with wti, but in the 60 to 65range. that should be enough to make a case that there's decent global growth even though they're higher >> the spike in volatility could be enough of a positive sign given we've had a flushout of the spike? >> it turns out to be a spike and usually a against for the market, yes, it is a positive. in terms of where it scale from, if you just tracked the year, things fell one by one, right? and trade stock, and then crowded into the big secular

growth, they fell apart. and the market couldn't bear it, at the same time, oil is crashing, all of a sudden, the fed seems too tight even though we're doing exactly as expected, to me, that was your source. >> and on the point of earnings, what do you think is priced in next year, early january, we'll start getting them in. that could be the catalyst to support the cheap stock. >> yeah, i agree the market is priced for a pretty significant downgrade, i don't think it's pricing in a negative year but i also think just because you're at that price valuation point at this point, the process of reducing earnings estimates is still pretty messy. >> and there's no incentive for companies to come out when they're giving guidance in 2019 when the trade war is still ongoing, and trade talks are still on for them to say things are looking good >> i think you have to be conservative >> right, exactly. >> in 2016, we kind of went through this in the earnings,

and all of a sudden, people starting to say, look across the valley it's a little different. >> the beginning of this pullback, we were in third quarter earnings season. >> yes >> and every day, someone was going to save us >> right >> and no one really disappointed that much and it never saved us why would fourth quarter -- >> i don't know. >> third quarter, second quarter. >> it was the outlook, too they were all good i just remember in october going into -- every time, oh, well, we have earnings this week, so that should be good >> i think it's the perfect storm of positive data, right? this is a fear-driven market the market is going lower and lower. we need to have a combination. it's a one/two power punch from the trade, the fed, and earnings and strong economic growth which could come in january and february and turn the tide of markets. >> well, it's been pointed out, no matter what the news is, it's

taken a negative rate. >> that's right. >> in the last two months. >> just because you don't have that tailwind of this globally synchronized expansion >> are you sure that's it? it's not free money? >> well, it's not everything all the time >> it wasn't reacting for years so it's like it's surging, 80 points anyway, thank you both >> thank you making headlines for this hour, the labor department will be out with its weekly report on initial jobless claims in about 19 minutes economists looking for a slight increase the commerce department will not be releasing new home sales figures as originally planned. the department won't be issuing any data until the shutdown ends the rise in fios customers may soon loose walt disney channel like espn. the contract expires on december 31st and foxconn will start making

higher iphones in india. it will be the first time that foxconn has assembled new ipho iphones in india it will focus on phones of x family the most expensive of iphone's lineup. >> i just think they're amazing. and the same way you charge them -- apple is pretty amazing. you take one out, it stops you hit it twice, you can talk to siri and she can screw up your dictation i got it as a gift it was a gift. >> you probably got the -- >> i think they look for me. >> they do look funny. very easy. >> you get a phone call, it's like you're connected. you can wear one, santoli, you don't even need both of them >> wow

>> go ahead. coming up, new allegations against carlos ghosn the details next plus, continuing coverage of the market's record-setting day on wall street. take a look at futures we are set to open lower, about 57 on the dow. down8 3on the s&p 500 stay tuned you're watching "squawk box" on cnbc

welcome back to "squawk box. you're looking at a time-lapsed video. actually, you're looking at me, but now you're looking at time-lapsed video of yesterday's record run for the dow and the index logged its largest one-day point gain in history. it was a 5% jump it was the biggest percentage move since march 2009. it was the biggest post-christmas rally for u.s. stocks, ever following the worst christmas eve performance ever the futures today are, you know, down a paltry 3 -- i mean we can do this standing on our head 300 points do we notice that anymore? >> just in the last half hour of trading, it's peeling back a little bit >> i still don't like it >> up days and down days, we've seen that acceleration in the couple final hours of trade.

>> yeah. >> i guess we have to lowlighig, the impact, whether in short coming or opposite, it's having a huge impact. >> i think you have a violent repositioning in a liquid market, is what's going on by the way, yesterday also broke a trend of incredibly persistent declines over the course of a trading day. >> closed lower or open for many days in a row during this decline and yesterday had the reverse. i think one thing yesterday did is just made those people leaning on the downturn feel a little uncomfortable back on their heels saying maybe it's not going to be so easy, until now. carlos ghosn has been held in japanese detention now since november 19th, after being charged with understating his competition by millions of dollars. now there are new allegations that ghosn was aided by the vice chairman of one of saudi

arabia's largest conglomerates a majority owner joining us now, jack ewing you've been writing about the story in the recent weeks and months jack, just outline for us one of the key headline differences between the u.s. and japanese legal system and how that has played out now for mr. ghosn in the last couple of months. >> well, in japan, you can be held -- once there are charges against eyou and you've been arrested as carlos ghosn was you can be held in custody the hole time in there, probably every day, he's been questioned by prosecutors and has not been able to consult with his lawyer while that's going on. he gets to meet with his lawyer afterwards, but he doesn't have

that benefit of counsel while he's being questioned. and he's not able to communicate with his family, or to receive visitors, except for a japanese lawyer, and perhaps someone from some diplomats so, it's a pretty tough form of law enforcement. and contrast in the united states where you do have an absolute right to have a lawyer present when you're being questioned and, you know, there's no -- there's nothing where you would be held in communicado. >> around a charge number of these cases, that you heard, with the accused confessing, rather than going to trial is that the aim of japanese authorities here, and how do you expect this all to play out? >> that's certainly the aim of the japanese authorities that's the way the system is set up, to put pressure on the defendants and something like 99% of all of

the cases end with a conviction, usually a confession but from what we know, of course, carlos ghosn has had very limited ability to communicate. but what we know, he denies these charges and he intends to fight them i don't think he's going to make it that easy for the japanese prosecutors but that also could go on for quite a long time. >> one of his fellow accused, an american citizen, mr. kelly, was able to post bail. were you expecting that? what does that mean for him? and does it change your expectations overall for both of them as to whether they're likely to end up convicted or released >> that was a little bit of a surprise because the last week, a japanese judge refused the prosecutor's request to deny bail, which was very unusual for the japanese system. and that sets the stage for mr. kelly to get out of jail, i guess that was on christmas day.

but mr. ghosn has, as you mentioned, new charges against him. that gives investigators a chance to hold him until at least january 1st or perhaps after. we may be seeing from the judges in the sense there's been a lot of pressure from abroad against japan, i think showing a somewhat unwelcome light on the japanese justice system. so, perhaps the prospects for mr. ghosn to get out are better than they were but, you know, he's going to be there at least through new year's day and possibly much longer it's very hard to say what's going to happen. >> thanks for joining us, jack ewing of the international "the new york times." the faangs, we'll tell you how much these five stocks added ttohe market in a single session on yesterday stay tuned you're watching "squawk box" on cnbc

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good morning, welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. we're watching three big stories this morning one, stocks, the worst christmas eve for equities ever. yesterday, stocked posted their best day percentagewise since 2009 we're also watching trade. a u.s. trade delegation will reportedly travel to talk with chinese officials. and day seven of a government shutdown and right now, there's no resolutions, all of the decisions all along, it's funding and president trump's border wall. marketing right n ins rights have a look at futures trading lower by 350 points, 1.25, 1.5% in each of the major indices. asian trade is next. the nikkei on the upside

it's been a tough weak for japanese equities. fell 5% on christmas day hong kong/shanghai down. and euro changed to 26th of december down today. and generally now extending its losses as we get into what would be free trade in europe is down 2% the ftse and the italian index both down 1% oil prices up some 8% yesterday. down 2% today. 45.4 for wti crude the dollar contained 0.5% yesterday, softening today against the euro and the yen plus flat against the pound. and gold, essentially is back this morning, at around 12.75. making headlines this morning, activist investors were more active. more than $500 million were subjected to demands this year,

the most ever. the busiest activist, carl icahn and starboard value. investors were still putting money in the net inflows in the at of $237 million for the first 11 months of this year. down 62% from a year ago and a decline since 2008 stocks are the largest short positions, they were a big part of the wall street rally yesterday. that is the biggest one-day percentage rise in the six-year history. among the stocks invested, bed, bath and beyond. snap hit a record low last week and ambbercrombie & fitch and the biggest impact on the spooider etf amazon jumped.

netflix, 8 it'.5 facebook, 8.2. alphabet, add all of this together and the faang group added $185 market value. here's where we are this morning, indicating it's getting back between 1%, 2% of those gains. i guess you have days like that. that we would have formerly referred to them -- i call them dead rock. nobody gets mad when i say dead rock i don't know -- >> people are getting -- >> oh, my, you can't say -- in fact, you forced me to say it. was it anything more than a dead rock bounce yesterday. >> well, we did see interest and growth, looking for things that are oversold everyone knows people are dumping stocks they want to gift rid of just certain names if you look at some of the faangs for the

last few days, facebook, it was actually up one day. i think people are wondering are we seeing another pain here for the term it will get relief. >> are faangs done selling? >> i think today is the last day. i think a lot of people are going to get the question a lot. what looks cheap and most people i work with, they're looking at the long term, right? they don't want to think about trading a day or a week, they want to think about the next few years. you look back at the data, they don't want to be that person dumping right at the bottom. >> i was sort of sad that the trillion dollar number was was fleeting, and i'm worried that it may be in the rear view mirror i'll tell what you i'm getting to, when i saw the $600 billion for apple, at least. we remember syscole $600

billion. everybody got there. and then we said will we ever hit a trillion and then three of them -- >> it's the rate >> amazon, apple microsoft. >> apple was almost a bell-ringer. not too far before the peak. >> will my yeair pod drive it back >> i'm saying there's people out there -- >> the interesting thing about that, it's an old point now, but it's so separated into the value faang. i mean, apple is trading back at the lower end of its ten-year valuation range. >> right >> it's back to this company can't get a multiple >> alphabet. >> alphabet is on the cheaper side i think it's more steady if you look at facebook, it's never been cheaper, it's not coming down more

on the other hand, you have the amazons and netflix. where people feel not much has changed with the fundamental story at all, if anything. the issue was it was expensive and crowded. so is the unwind of that crowded hedge fund trade in those names true have we fleshed out. is that the catalyst, or is that the down side, in which case, tell me? >> we're not there >> this hasn't applied to apple as much but the likes of facebook, they'll never truly get back to a super valuation. >> that's right. >> it's not getting back to the peaks of six or 12 months ago. >> i would agree with that in the back of your mind, you have to feel with, look, yahoo! was the one to dominate. >> and we worry about the euro model of privacy which scares me for someone who is so gent depe on having --

>> you don't recommend more regulation of those? >> i think i've signed my life away i don't know i like really successful companies. your privacy is done for i feel bad they've taken it without me even knowing. >> the idea of fining a company for total revenues for major breaches that seems to be a huge incentive for companies to get it right >> what if we no longer have it for free, while using the service, i'm compensated >> i think the wildcard risk when it coming to actual valuation, not priced in, because we talk about gdp all the time, is some kind of law, the uk is talk about this a lot. some kind of law rather than wherever their headquarters are, whether the earnings are reported, you've got "x" million users in this country, this is your total

revenue, we want that much tax >> how do they figure out where the people are physically located? if you're a hacker and can disguise your location -- >> i don't know. i don't know they're even close to enforcing that. that is the thinking now, because people are so angry with the social media stocks because the privacy issues and with the company. so there's a bigger political incentive for the nations for that >> if i said privacy, i think people would laugh f you had told these people you were going to get this kind of sale, a discount on these faang stocks, look how they're so loved every day. if you said they're going down 35% or whatever -- >> they've actually changed a number of stocks >> you're one of our guests, massively overselling to a rare opportunity, is that wrong >> it's not necessarily wrong.

again, for netflix and amazon, you can make that case >> but to that point, there are factors that have changed to growth projectories, i think you have to take that into account when you look at actual movement price. >> i think people who are in the business of investing money for a longer term, if you don't look at a 20%, 30% pullback in a stock that hasn't changed as much, yes, of course, you're looking for a reason to buy that or just act on it. but it doesn't mean it goes up on a dime. >> if you're looking for your reports, both amazon and facebook, they did beat to joe's point, they disappointed on revenue growth you're not coming on huge valuation if you're ceasing to be as much of a growth stock >> amazon got it lower for the fourth quarter apple reporting changes. >> yeah, there's new attention on how ad measurement is a complete mess. >> right coming up this morning's top stories including the wild flings that we've seen in the global markets

plus, we're going to focus on currency and commodities which matter to what we're telling us. check out yesterday's top-performing s&p secto ay tuned you're watching "squawk box" on cnbc erything i buy. and last year, i earned $36,000 in cash back. which i used to offer health insurance to my employees. what's in your wallet?

welcome back to "squawk box. wti and brent taking a breather after yesterday's big, big gains of 8% or more. wtf, up 6% or more we're taking a look sat potential market drivers nor 2019 here's brian sullivan's playbook on energy companies. >> reporter: 2018 was the year oil prices collapsed along with stocks as long as opec tried to reassert its power 2019 could be different. here are some predictions. one, oil prices recover but only by a little. it will take time for opec's recent production cuts ultimately to affect the market, along with a flattening out of u.s. production should support slightly higher prices look for oil to be in high 50s

to low 60s for all the year through july and scale matters, bigger is better when you have to control costs. look for the exxons, the chevrons and other big players to keep selling the assets they don't want, and spending to grab up some of the best acreage in america. three, opec gets smaller as the new-opec bill rolls through congress as qatar called it quits look for iraq and iran or both realizing going their own way is the better and if that happens a relationship with the middle east could take a significant turn from commodities to currency now, the dollar faking a check here, with little change here against the pound, as well as the euro, pretty much, by taking a breather against the japanese yen. joining us now is the nick

benin, head of currency at wells fargo. nick, great to have you with us. it's hard to think that where the dollar was a couple weeks ago. where do you see the dollar heading in the immediate term? >> in the immediate term, i think it will remain strong. 2019 is going to be a year of two halves that's good for the dollar you have high tolerance in the equity markets they're too large in any direction. from a political perspective, you've got an ongoing shutdown for the time being and led into the fed chair and all of this kind of stuff. so, it's kind of come into markets but there isn't really that much for it >> so in talking about the tale of two halves. the first half of the year is going to be the year of the stronger dollar? >> yeah, i think so.

i think the dollar can remain supported until the early part of next year certainly, the rhetoric between china and the u.s. has improved but i think it has to be a comprehensive trade deal within that 90-day period that they talked about i wouldn't be surprised if they see more tariffs on chinese goods. >> you think there's going to be g-10 strength against the dollar and eu weakness, is that right >> yes one g10 strength or divinity and insights in terms of brexit, but we do think when the brexit vote comes around in january, for example, that a deal quite close to what's already been discussed will be improved so, we hope for the pound as we go through the early part of the year, and especially through the latter part of the year, we could see countries, regions, like the eurozone and some starting to speed up their monetary monitoring. that should help for the

currency later next year >> thank you so much, nick >> can you recognize the accent? >> i would guess south african >> kiwi. >> kiwi, that was terrible i would say with the name -- >> it's dutch heritage >> but you are comfortable listening -- >> listening than for us >> yeah, i would think how do you say privacy >> privacy >> how would you say papajohn. >> that's enough >> thank you, nick still to come, we'll focus on financials, we'll talk interest rates, nkanthbas d e prospects for 2019 we're back in a couple minutes

welcome back to "squawk box. let's talk about financials. joining us from chicago, david long, regional analyst david, thank you for joining us. we're talking about earnings season, do you think that can be a catalyst for the second week of january when we see the banks start to recover a bit >> yep, yep, january 15th, we'll have wells fargo and jpmorgan kicking off the stocks we'll be cautious on the banks we do believe 2019 will be a challenging year for the banks

we think right now, earnings estimates not necessarily for the fourth quarter but 2019 and especially 2020 are a bit too high and as we get through the earnings season and we start revisiting our models, we could see pressure on earnings and may not make the banks overall look as inexpensive as they are today. >> interesting what area of banks over all sectors or retail bank focus >> yep, yep. looking at the margins, most investors, the stocks are the first thing they're looking at the money they make on assets, securities, loans or deposits are going to be understand pressure a few months ago, the market was expecting three to four rate hikes in 2019. the ten-year was 3.20 plus, now we're down to 2.75, 2.80 maybe one rate hike next year. that's going to pressure bank asset yield at the time when the

cost of ghodeposits is rising >> basically the oncenssenten cs outlook for nim's have changed >> there's been very little change since october ten-year was much higher expectations for rate hikes were much higher. positive data typically lagged and we've seen overall deposit data at about 35% cycle to date. and that number typically gets closer to 50%. we expect those prices to rise faster like i said, i don't think all of that is built into expectations right now >> david in terms of valuation, traditionally, banked trading at 60% of the s&p 500, average at the moment so you're painting, if you're not building what's priced in, you're expecting quite a

recession-type earnings in the next year or two >> i don't know if i'd call it a recession-type earnings outlook. but right now, that is too high. and that multiple, the forward pe number is probably a bit low. given that the earnings number may be overstated right now. >> if you had to pick one to buy, which one would it be >> right now, the name that i like is zion corp. out of u.s. a great deposit base reasonable growth. they have excess keep the. and buying back their stock. and they do have a revamped culture. >> of the biggest names, which is the main one to avoid >> wells fargo wells fargo is one that looks inexpensive but it still trades at a premium to a lot of its peers. they've got fundamental problems expect the revenue to be down again in 2019, down in 2020.

look, their earnings per share, about a dollar per share has not changed over the last five or six years. and the return on common equity which was better than peers five or six years ago continues to lag its peers by five or six percentage points. >> david, thank you. futures pointing to red hours before the on.pe stay tuned "squawk box" will be right back.

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let's take a look at some stocks to watch this morning jd.com is launching an extensive revamp according to "the wall street journal." the china-based company report d reportedly going to provide for jd mall. and plantronics settles bribery case with polycomunit. and loop capital is repeats a buy recommendation on cbs shares saying the stock has the most favorable risk reward profile among immediatemedia stocks the uncertainty over a new ceo and the prices what it calls

unextraordinary act terrorist lev active lelevs. >> and outtrending now 29 points on it's daow back in a couple minutes

rally in jeopardy, after the dow's record-setting jump yesterday. futures deep in the red this morning. black gold

>> the whole ocean, no one can get at it except me. >> crude oil at its low. and tech power in stocks, the runup and selloff. points for another wild year ahead. we'll tell you which ones and why. the final hour of "squawk box" begins right now ♪ here i am rock you like a h t hurricane ♪ >> announcer: live from the most powerful city in the world this is "squawk box." good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernin with the very perceptive melissa lee and wilfred frost. >> that mean i'm not perceptive? >> no, just the most recent comment that people didn't hear. very true, melissa we can't share monica knows, though, if you

want to share it >> very personal here. >> always does >> jpmorgan private bank i think people should want to know -- >> i think the fact that you keep talking about what we haven't talked about with the viewers is sort of -- >> it doesn't give you right to reveal -- >> i apologize it was a personal thing about -- all right. futures right now, they had a 2 handle about ten minutes ago now we're down 351 nasdaq 96 right now. i still think it's interesting that the ten-year is below 2.80. as we were once again waiting for the 3.25 to 3.5 that was going to come like night follows day. nothing like a little market volatility in the face of continuing short end increases, we're back down what do we get to, 3.23 or so?

>> right, and it was still setting up sharply so for everyone, it's all about interest rates >> i still don't know why this isn't a good thing for certain sectors, though. >> it's about the banks. otherwise, if everybody is just about rates, then -- >> i don't know whether it's the auto sector -- >> the question is how long do you stay here? >> and people don't think it is. once we stabilize. we're watching three big stories for you this morning, number one, green on wall street turning to red futures as joe mentioned, much lower, threateninging to wipe out a chunk of yesterday's record-setting gains on an absolute point basis, the dow did see its best day ever. number two, wti crude is down 1% after surging 8.7% yesterday was oil's best move since 2017 despite the gain, crude is still

deep in bear market territory. and, three, uncertainty over the government shutdown stretching into a sixth day no signs of a resolution with president trump again today tweeting about the border wall a few stocks to watch this morning. visa has announced the acquisition of the british firm earthport. it specializes in national transactions for banks and businesses nvidia price surge to 230. the firm is maintaining an outperformed rating on nvidia. let's get back to the markets and check in with one of our most frequent guests, that's because we get so much good stuff out of him, jim paulsen is chief strategist, and gene goldman, also seen quite a bit

here on "squawk box," chief investment officer and director of research at cetera management jim, it was only about a week and a half ago we saw you last you talked about the yes, the stag and the flation and you put them together, and you get maybe the worst thing for financial assets have you changed your view on that, given what we've seen on copper and oil, or is that still one of your biggest concerns? >> well, you know, joe, i think we were growing over 3% in an economy with unemployment rate of 3.7%. and that was unsustainable we were going to end the bull. we were going to end the recovery if we continued to do that because the fed and bond vigilantes would have to raise rates to kill them off i think what we've done here, we've created a slowdown in the economy. i think we're going to slow

below 2% in the next four quarters for 2019. and that might be enough to eliminate stag and put a pause button on the fed and bond vigilantes and i think we'ill allow another run in the market. i don't know where the market is right now, it's going to be volatile for a while but i think it's time to lean back in a more conservative stance in the portfolio. i don't think it will set new highs than we've already seen, but i think we're going to have a pretty good 2019 finally i think we created some panic. we've massively revalued things. taken the multiple and trailing earnings of the s&p from 23.5 in january about 16 times and we've created some panic, and i think we're going to have a definitive view that the fed's done raising rates and maybe will even cut rates in 2019. >> you know, paulsen, if you

were like joe grando, or you had investment groupies, this is a huge change for you. and you're on quite frankly. and i didn't know you were going to necessarily get, you know, be this sure about what you're saying when was the last time you were this bullish, jim? probably 2 1/2 years, 3 years? >> i'm never sure, joe i'm never sure >> and it hasn't been wrong where you were i don't know if you got with the right for sure but i'm not sure about the commodity valuation, but you haven't been this bullish in recent years is this the first time you're telling everybody, or have you put something out on loophole? >> well, i haven't written anything i've got a piece coming out next week i guess i was last and late in 2017, joe, and kind of been

more, you know, cautious since and i could be wrong maybe is this a bear market and we've got farther to go. i think the key issue is do we recess or not? i just don't think we recess i just don't see that this year. i think we've got a great fear of it, and with corporate bond spread falling out, yield curve flat, people getting more and more conservative. but i think we're going to skip a recession, at least in the foreseeable future >> and have another leg? >> and i think we'll have another leg. i think we ought to get more aggressive for the first time in a while. >> i'm going to get to gene and sorry to take this long. but what about copper and oil, jim in terms of your commodity inflation concerns >> right >> did the concession concerns -- >> they'll come back, joe. >> huh >> they'll come back if the recovery doesn't end and we're still at 3.7% unemployment, eventually if they continue to grow, we're going to

raise it the key issue, what's going to happen, the dollar is going to go weak. that's what killed off commodities in 2018 was the 10% rise in the dollar if that breaks down again, i think we'll revive gold, if not gold, we'll revive oil and other commodity prices again and i think cyclical commodity stocks might do very well this year in 2019, if that dollar breaks again as i guess. >> where are you on the possibility of rye sessiecessioe i see here, you say we overreacted. but are you looking for earnings growth, will there be a recession in 2019 or no? >> definitely not. we're not as bullish as jim is. >> never bullish cautiously optimistic -- optimistically cautious or something. change it. >> yeah, we debated this last time cautiously optimistic. think about this, stocks adjourn by two main factors, number one,

fundamentals, two, valuations. look at fundamentals earnings are going to be up about 20%. next year, earnings, 7.9%. revenue growth up 5.2% let's say the economic date is 6 to 8%. from the economy standpoint, gdp is up 6% and look at retail sales, yesterday, retail sales came in at a six-year high shipping valuations and saying that trees don't grow to skies so stocks are due for pullback think about washington, we had europe, we had concerns about the fed, we had a lot of issues out there. stocks are due for a breather, we do believe, though, stocks have pulled back too far right now the pe ratio on stocks and earnings is about 14 that's a four-year low and bob yesterday, we echoed a

few thoughts no to negative earnings growth we believe a recession may be 2020, but 2019, you think about it, we just finished christmas the discussion a year ago for christmas was bitcoin going to zero or 100,000. now the discussion around my christmas table was when will the recession start in 2019? we don't see a recession in 2019 we see maybe 2020. 2019, the congressional budget office, the consensus is saying 2.0, to 2.4% growth in 2020. >> it's more of a case of whether or not we could miss gdp growth by half a percent next year >> true. but that's why the expectations are mid to single digits we're thinking 4 to 5% returns next year but it will be fun and loaded we do think it will be strong in the first half of next year.

but with the increased likely hoold hood of a recession in 2020, it will be weakened next year >> we won't even get back to the highs? >> no. >> no? >> that's why we're saying market returns are going to be 4%, 5% you're looking at maybe net 100-point rise in the s&p 500. >> jim, in terms of nexus gdp growth, if it missed by half a percent or a percent but still grooved, you would think the markets rally here >> i do. i think we're going to grow sub-2%, wilfred. i think the earning on the s&p might fall this year, down from where they end this year look, one thing to think about this, when we started late 2018 there was nothing but sheer optimism everywhere. we knew we were going to have explosive upside profits, tax induced. we knew we were going to have

considerable gdp growth. and we new we were going to have a synchronized recovery and it turned out horrible for stocks >> davos >> yeah, with pessimism. with people going it could be a re recession, we're going to have earnings estimates coming down i think that's good for stocks at the end of the day. we need to hit the pause button on higher rates. and one way to do that is to create a major slowdown. so, this slowdown is not a bad thing. this slowdown is the key to maybe elongating this longer than it may last >> people -- we're going to davos in less than a month, with all of the elitist globalist on their private jets solving inequality and private change, but we're going over there, but we should wait to do anything until we get to davos? >> it might be too late.

>> yeah, it might be too late. thank you, gene goldman. and jim paulsen. >> it's the 21st or something -- >> yeah. >> you should see the rooms. i mean, my toes hit -- >> i've been there, i went two years ago. >> why can't they make a bed -- what do you do you get one of those adjoining rooms and stick your feet out through the -- coming up, trump, trade and brexit are just two of the bigger political stories this year they're not going anywhere for 2019 we'll have a look at how the biggest stories will impact the markets next year. stay tuned, you're watching "squawk box" on cnbc i'm a veteran

and the army taught me a lot about commitment.

which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. welcome back to "squawk box" as we get ready to close the book on 2018 we're getting ready to look at some of the market drivers and asking what might be in store next year. joining us for the big political issues very good morning to you, d.j. top of the list, i guess is the relationship with china. do you see marked improvement in that next year

>> i don't see marked improvement. i think we will see some meetings, some talk about marginal improvements on tariffs. like we saw perhaps with north korea last year. but i think it's really important to keep in mind that we don't have just a trade war with china where we are right now is the dawn of a new cold war with china, between united states and china, and that means competition on the technology front. economic front, of course. but also military geopolitical and ideological. so there is a much more complex relationship that is going south, and will continue to get worse in 2019. >> as for the old partners that were, or opponent that were in the first cold war with russia do you think u.s./russia relations could get markedly worse next year as well? >> we've seen some provocative moves. certainly in the cyber warfare

arena, nibbling in the u.s. and around the world in brexit, stirring up tensions in france, across the continent on the immigrant issue, in eastern europe and you also saw a new missile test, suggesting moscow is trying to skirt around the existing weapons treaties that we have with russia. so, i think you're going to see continued asymmetric warfare by russia, trying to gain an advantage geopolitically >> and what about europe, though you mentioned brexit and some of the other issues do you think that will improve once we get past the brexit date, for example, or is there more risks bubbling understand the surface that people realize across the continent >> that's a great question let's first talk about brexit. we don't have a deal in hand yet. we have a proposal that the may government has put forward she said she's not going to have a vote until middle of january that's only about ten weeks

ahead of the brexit date what you're going to see is increasing concern and panic, not only in london and by traders and by companies trying to do business with the eu but you're also going to be seeing increasing concern in brussels and across the european union, because they're going to be looking at a brexit cliff so, therefore, what we're going to see is either a scramble to try and get the may deal passed. or there's going to be an effort to defer it indefinitely because what we don't want to see and what traders don't want to see is going off the cliff. but i think what's really important is will there be a government in the uk, ultimately, to implement any deal we've seen the catastrophic fall and popularity and support for the may government i think the really big question going into the brexit who is going to be in the leadership of the uk >> d.j. when you take a look at potential issues geopolitically,

what is the most underpriced issue in the markets right now >> i'd say it's a politicization of technology. you look at the markets over the last few years, certainly in the united states, they've been driven upwards by technology stocks and what we're seeing is governments striking back. whether it is around privacy, in europe, and privacy, i think will become a much bigger issue in the united states, in 2019. you're seeing countries trying to put ring fences around data, and data flow, so they can control it whether it be in russia and china and in europe. and it's questions of actually who gets to control the technology who gets to sell it and to whom. and we're already seeing this in the chips arena. i think that's just the beginning of the kind of government control that we're going to see around technology and critical technologies of the future i think technology and the

politicization of technology is going to be a big story in 2019. >> okay, d.j., thanks for joining us, appreciate it. d.j. patterson of longview global advisers. coming up, selling at a loss on purpose it's what investors hold dear but that's what's happening as we approach the end of the year. the reason, taxes. we'll explain tax selling when "squawk box" returns prevagen helps your brainhrougn and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. healthier brain. better life.

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welcome back to "squawk box. futures pointing lower after yesterday's report-point gain, over 1,000 up. we were down close to 400 earlier. we're improving a little bit down 292 points on the dow >> we want to take a closer look at year-end tax selling in the market >> melissa, coinciding with the holiday season, it's called the harvesting season, when investors look for losing positions in their portfolio and sell or harvest them to reduce capital gains on other investments. it's called tax selling, or tax loss selling and it's a common phenomenon at end of every year, particularly this year, well, because there

are substantial losses to be harvested. even with the rally in performance in the s&p that's been abysmal it's difficult to know what portion can be attributed to tax selling specifically but it feeds on itself meaning the more people that are selling in the market for tax purposes, the more exacerbated the market declines become, experts say. bob willings, a tax adviser to investors told me his clients have been doing this actively in recent weeks in a down year, it's little or gives little for tax, the top tax rate of 23.8%. one caveat is buying securities 30 days before the tax loss sale the deadline is december 31. the question is whether that will put additional pressure on

the market in the last three trading days of the year, guys >> i don't see why it wouldn't >> well, yesterday, we saw a rally. but that can be thin this time of year. any pleasure for people looking to harvest these losses towards the end of the year, a mean, dismal performance >> there are redemptions but also telling gselling on the bf that so there's two major places. >> exactly, hedge funds are seeing redemptions and a lot of people are forced to sell, whether for tax purposes or whether just to fund those redemptions and get liquidity. you're seeing a lot of forces play in the last few days of the year >> again, we see a balance and that could give us a look to january. coming up, key economic data just minutes away. we'll have breaking jobless claims, it's thursday.

"squawk box" returns in a moment as we head to break, here's a look at equity futures, down now. the dow, 286 you always pay your insurance on time. tap one little bumper and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect.

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jobless claims take a look at futures we're looking to open lower by 300 points checking on the ten-year yield, 2.758% let's go to rick santelli. he's there with the numbers with the release of the numbers, maybe the only this week because of the shutdown this week. >> absolutely. we should set consumer confidence as well today but initial claims, they dropped 1,000 from a slightly revised 214 last thursday. that moves up to 217 on the revision that moves down 1,000 to the arrived at destination and continuing claims, fairly lateral, from 1.705 to 1.701 million. melissa, indeed, the home sales will be delayed due to the shutdown and consumer confidence at 10:00 eastern should be released,

normally, we're 2.75 as you mentioned, melissa lee, we were to 2.25. the treasury yields paying particularly close attention to the weakness or strength in the equity complex joe, back to you >> thanks, rick. steve liesman joins us now with more 2.16 is still a pretty good number, steve. >> yeah. so, we used to think 300 was the number to get worried about. and then we didn't get worried, nowhere near there we've now established a new get-worried number which is 250. >> okay. >> i'm not sure that's the number i'm not sure of the relationship between claims a little more, because they've made it harder to get them. it's unclear how good -- i think if it spikes up, which if we had

a spike of nervousness, it's come down. it's not too bad i do want to talk about how much the economic data may be contributing to the concern out there. let me show you the goldman sachs economic surprise index. first of all, it's all still positive from all of the positive, down towards zero as in not so many surprises. i think relative to the surprises we had earlier this year, there are many fewer upside surprises that were not surprising negatively. and then i want to show you some of the fundamental data that we've got and how they have performed relative to expectations and what's wrong with the analysis, it just tells you how you did. and retail sales, better home sales, by the way, have been better. you notice the last couple ones have been pretty good. consumer confidence numbers are better auto sales directionally down. they did beat expectations still at a decent level. one more screen here, if you

will the jobs data was down, missed on the estimate. but still a decent level fed manufacturing surveys, those are the ones spooking people out. >> like richmond >> richmond. we've got extras here, those investments have been down relative to the prior and the nfib as well and we're tracking 2.9 on q4, depending on your relative expectations and see q1 '19, it's a good number >> where should it be? >> i'd say a quarter point, at least higher what's interesting, joe, it's east >> the tightening with 2.75 again. >> yeah, there's a problem with that, if you want to start thinking about it, which is the

fed wants to tighten conditions a little bit and what have conditions done? they've eased. >> so housing may be a trouble spot >> i think you may be seeing it already, joe, right? if you have the somewhat better housing. i don't know if that bakes in the recent decline in mortgage rates. >> are you surprised we're not at 3.5, we're back at 3.25 >> 3.25 was my prediction. luckily, i don't get paid until trade volumes. i get paid to help people. >> i know. >> let's bring in john riding. john, steve had a nice rundown of where the data has exceeded expectations before we have missed expectations so what's your take overall on where we are >> i think we're actually doing reasonably well. i have a problem with economic surprise indexes, what happens is we get surprised positively,

so we raise expectations nobody imagined 2018 was going to be a year of 3% gdp growth. maybe even 3.2%. so expectations have moved up. and we're doing better than we were doing and what we were doing a year ago. and now the surprises bring out momentum so i think the economy is doing okay and i think the markets are scaring us and they're in need of a very fundamental story. so what's the fundamental story? the economy. but the thing that drives the economy is profits and profits have been a positive surprise for 2018 as well. so, i think the economy's doing okay and i think we will have a number again close to 3% for the fourth quarter maybe a negative surprise in the first quarter because statisticians can't seem to clean up the data seasonally i wouldn't be surprised to see --

>> that q1 problem >> that q1 problem >> john, i have a question for you because we don't want to have the same discussion on the balance sheet as we head yesterday. here's my question that i've been looking for reporti reportingwise -- you missed it joe. >> dvr >> it was 8:30 it was unbelievable. >> 15 minutes. >> you look at it, you come back and tell me if you want to do that segment again >> i mean -- >> sign me up. sign me up >> remember that play where the patriots lost on the last -- >> yeah, right >> it as good as that? should i go back and watch that? >> some. >> i've been trying to report and understand, if the balance sheet is the bad actor that everybody says it is, or the fed's reduction in the balance sheet, where it showing up because i can't find it in

consumer lending i can't find it in higher interest rates because as joe just said, interest rates are lower. what is the conduit between the evil decline in the balance sheet is perpetrating its evil in the economy >> well, that's the problem, isn't it there is no obvious transmission mechanism. because when the fed did quantitative easing and all of the treasury bonds and mortgage bonds they purchased bank reserves were just redeposited in the fed and sat in reserves so they didn't do anything back to the financial crisis in 2007, 2008, excess reserves were about $1 billion and excess reserves were close to $3 trillion there's no reason it should affect lending now, the -- >> to a point of information, they had not been taken out, there's still a whole lot of excess reserves out there.

it reduced them by a trillion or something like that. >> absolutely. absolutely and the balance sheet for for natural economic purposes which is essentially to back the currency, whatever that may mean in the world of that money, could come down more than $2 trillion now, the mechanism has to be interest rates and the qe held down long-term interest rates and interest rates rose, along with projections for the fiscal deficit and $1 trillion in the current fiscal year. we know from the bear market, markets don't move one way we do get overconfident and we had a massive short, if you look at data in treasuries a couple of months ago. and every seller is someone who is going to buy that treasury

back when they get underpressure, or when they've made a profit or whatever. so, i do think the odds are headed higher. but it the boogieman that caused us to climb the equity market. >> john, listening to you, just listening to you, i would think the market would be up for the year i would think copper wouldn't be hitting lows i would think oil would be up at 70 or so what the hell happened given everything that you just said, you made me feel really good, not to worry about anything what happened to the stock market what happened to commodities what happened to caopper? what happened to oil with the market, can we talk ourselves into it, it self-fulfilling that we caused the market to shrink and the slowdown >> it's possible could we fear ourselves and about afraid and push ourselves into recession >> you didn't tell me anything that worried me. you sounded great. >> but i'm not concerned oil is an issue for the markets.

lower oil prices bring down bond yields it's viewed as risk up it used to take equity prices down when oil prices went down, but that's changed the recent change in oil price is a surprise. and the u.s. is just very good at finding oil and developing oil. so, we go through these violent cycles of being over $100 a barrel in late 2014 to under $100 a barrel in 2017. the supply shuts off and then we get new oil supplies in the market. oil goes through these crazy cycles >> it's a beast of its own and the stock market is not a good indicator of the economy right now? the stock market is not actually -- >> i don't think the stock market -- >> before you answer that, i know that you and conrad are bigger -- the guy that works for you because i know i've talked

to you guys quite a bit. are bigger believers of the returns of tax cuts next year than the average joe do you think it's brought it down to zero, the added gdp and added growth next year >> i think if you look at the equity market, the equity market justifies looking at a pretty weak gdp number. what is the biggest change in tax cut? it's a 25% corporate tax rate that took 35% tax rate that was impacted against every major economy in the world so that creates a permanent discontent between the rest and the u.s. if we look at the numbers, i there is another tax or fears of another tax out there that maybe has clouded investment which is tariffs. that's been a big issue for the last six months. but i think eventually that gets cleared up.

>> it's weighing on valuations, right? you argue that the market is cheap, but if earnings decline because of tariff, and the market is trading 16 times the earnings john, good to see you. thank you. still to come, a grand total of three trading days renan 2018 then we start all over again when we come back, we're going to take a look at some of the names that powered this year's rally. and those that are going to the selloff. we're back in a couple minutes >

box. as the year draws to a close, we want to take a look at tech stocks in 2019 let's welcome in ed lee, "the new york times" media reporter, and cnbc contributor who usually will make the effort to join us on set ed, what happened, dude? welcome. >> well, i'm out here in houston, man, i'm visiting family >> oh, that's good >> yeah, i took some time off to hang out with you guys, at least remotely, comepacino, we pull y, don't we a thousand points. we need all hands on deck. that was something yesterday, wasn't it, ed but we're giving back about 300 right now >> we're giving back the single biggest for the dow jones. look, it's a lower trading week as it is it's going to be a wonky -- you got better trade experts there on the panel, i know

i don't know how much that tells us about what's going to happen going into 2019, yes, it's nice to have a lower rally. >> ed, we got facebook concern, privacy concerns, apple, i don't know, unit sale concerns is everything with these great stocks that we loved six months ago, is everything different everything's off the table? do you have a feel for that, or should these be bought here? >> look, these are still phenomenal companies, i think there were troubling sides from the q3 report. facebook, amazon, apple, they all missed on the top line they beat on the bottom line which is nice. those are more sort of value stocks, if you think of it in those terms. also expectations going into q4 and 2019, they all sort of suggested, you need to adjust your expectations on what to do, at least on the top line and i think that's a bit

worrying, right? i think there's a sense of a saturation point, at least in north america for these guys growth is going to come from overseas, but we all know what global trade looks like these days it's much more tighter, more difficult. there's still going to be business for 2019, but it's going to be much tougher and i think if you're buying into it, your sense, your expectations on that trade should be adjusted. >> ed, you talk about saturation in north america, how do you take into account products that haven't been monetized such as whatsapp >> that's a great question whatsapp is a facebook company they're looking for monetize it much more than it has been instagram is a device, whatever you want to call it, they're looking to get into that system than otherwise would have. yes, definitely potential for growth i think facebook at least at this point, they don't want to

overload it. it's starting to happen with facebook proper. i think with instagram it's starting to happen people are seeing more ads in there. i don't think people are leaving in droves, but it certainly makes people rethink the use of that product i think something like whatsapp, it's going to be much smaller. whether it's google or amazon on the ad front, it's going to be online advertising that's going to be figured out a lot is going to be video a lot of experiment. a lot of different formats happening with that. it's going to take a while to really settle in terms of advertisers. >> do you think the best days for a company like a facebook, maybe a twitter, i'll throw in snap, they're basically at a rock low at this point are behind that? we haven't seen potentially what regulation could come in the united states. and we haven't even seen the full flexing of gdpr in europe

>> i think that's a great question facebook, they're more on the hot seat relative to these other guys twitter and snap, this is an opportunity for them, because they've sort of been in the doldrums as far as their user base it's a chance for them to get back users or new users. i think facebook is going to have a harder spot and i think -- i'm not saying the best days are behind them but their growth is definitely going to be slowing down going into 2019. again, they're going to do great business but it's not going to be as great as it was either this year or the year before that. advertising globally is going to slow down next year compared to this year. it's going to be the peak. >> ed, you know how much people in the media love to talk about media. you know that. >> yeah. >> anyway, you are the big "the new york times" media reporter you have like a list of ten things for 2019. and if you don't, why not? and can you give me some of your

what's going to happen you got to have something. give me something. >> predictions >> i have a list i have a list. i have a list. i'm working on it. >> can you take biggest thing, the first thing to look at on this list is cbs veia com. look to the first quarter or the end of the first quarter of the year for some kind of movement and announcement on how that is going to happen and what that is going to look like. they were close this year. they were pretty close to it. it became more of a management issue. tied in is who will run cbs and whoever does that has a chance to run the entire company. >> we have to go. >> i want to hear all your predictions. come back on. >> over the top.

>> we can do a whole segment on over the top. >> think about that. it is hard to believe you haven't done a ten media surprises. it's just an idea. >> what are your editors at "new york times" doing? put something together for next time you come on. thanks. "new york times" media reporter and cnbc contributor, ed lee. >> when we return just over 30 minutes to the start of trading. we'll preview the day ahead and get you ready for the opening bell. squawk box will be right back.

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let's check in with jim at the cme in chicago. jim, good morning to you. what do you make of yesterday's rally and whether that was going to draw a line under the big negativity we have seen? >> everybody and their brother on social media keeps talking about how when you see a five percent rip your face off rally in the context of this price

decline, that more defines the bear market. that is usually true. there have been plenty of times that the five percent moves off the lows defined that low, that significant low. what we learned about it was maybe we're still in the midst of all of this. you throw in the fact that it is the day after christmas, volumes are unusually low. we probably have to wait about a week to get any real sort of clarity. on the short term, if we took out yesterday's highs which is about 2480 in the futures and we felt comfortably above those, i would think that in the short to medium term that was a bottom. right now i think it defines -- the tradeable part for me is if it does go back above 2480 that is when i think i will start to increase longs. >> talk about other action and the correlations we are seeing. it was a strong dollar day yesterday and a weak one today so it's not feeling like interest rate or fed related in terms of what is impacting it.

>> i think the whole thing for this year has been fed and rate related. i think right now the market is in some sort of a temper tantrum trying to convince the fed. they moved along on that path. the reality of it is is that when rates go from zero to almost three percent you must rethink your equity strategy. we throw in the computer algorithms. they perform a service that's in some ways very, very bad because when markets are calm they add to the calm through market making strategies. that's only mostly bad because it wipes people out, but it does remind people that risk assets have risk to them. >> great stuff. thanks very much for that. coming up, more with guest host monica. then jim cramer will join squawk

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while the s&p posts modest returns in the first quarter, a few sectors outperform, consumer discretionary, tech and energy. final check on the markets

right about where we have been throughout the premarket session, down 325 on the dow. s&p down 36. thank you. should we wait until next year to make big decisions? >> i think be patient. >> melissa we'll be here. set your alarms. "squawk on the street" is coming up right now. i think cramer's back. ♪ good thursday morning. welcome to "squawk on the street." david's off today. cramer will join us by phone in a few moments. futures are red. china, hong kong, europe have been unable to follow with rallies of their own. oil is red which has become a key driver for equities. our road